Question

Parnell and Adam are partners. Parnell contributed $40,000 and Adam contributed property valued at $30,000. The partnership agreement states that profits are to be split in proportion to capital contribution, but is silent as to how losses will be shared. Last year, the partnership had losses of $80,000. How were they shared? $40,000 by Parnell; $30,000 by Adam; $10,000 is carried forward to next year Equally by both partners In the same proportion as profits $40,000 by Parnell; $30,000 by Adam; $10,000 from a bank line of credit

Answer 1

1: In the same proportion as profits

(When the Deed is silent as to the loss sharing ratio, it is assumed to be the same as the Profit sharing ratio. Hence other options are invalid)

2: Jason, the partnership and each of the partners

The partners are jointly and severally liable for the losses of the partnership and also the acts of the other partners. Also the partnership will be responsible for the acts of the partners.